Do Economists Recognize an Opportunity Cost When They See One? →
Joel Potter and Shane Sanders:
Ferraro and Taylor (2005) asked 199 professional economists a multiple-choice question about opportunity cost. Given that only 21.6 percent answered “correctly,” they conclude that professional understanding of the concept is “dismal.” We challenge this critique of the profession.
Thank goodness somebody is defending us, because I basically spent 5 years in the university to be able to include opportunity cost randomly when I speak.
But before you get all high-and-mighty like I did when reading this, check out the question:
You won a free ticket to see an Eric Clapton concert (which has no resale value). Bob Dylan is performing on the same night and is your next-best alternative activity. Tickets to see Dylan cost $40. On any given day, you would be willing to pay up to $50 to see Dylan. Assume there are no other costs of seeing either performer.
Based on this information, what is the opportunity cost of seeing Eric Clapton? (a) $0, (b) $10, (c) $40, or (d) $50.
I would have said (d)…
/via Marginal Revolution
